Formosa bond
Encyclopedia
A Formosa bond is a non-New Taiwan Dollar
-denominated bond
issued in Taiwan
by a foreign institution.
. The name refers to Formosa, an alternative name for the island of Taiwan; it was chosen as the result of a contest held in September 2006 by the FSC. 15 names were suggested, intended to reflect special characteristics of Taiwan; two different Chinese-language
versions of the name "Formosa bond" were suggested, as well as "C-Wang Bond" and "High-Tech Island Bond". Participants were also invited to suggest their own names for the bonds. The result of the contest was announced on 25 September 2006; "Formosa Bond" was the most popular choice, with 5,776 votes, or 57.16% of the total cast; the second-most popular choice, Taiwan 101
Bond, had only 1,229 votes, and the third-most popular choice, an alternative Chinese translation of "Formosa Bond", garnered only 618 votes.
of BBB or higher; they may not be issued in Chinese renminbi
, the official currency of the People's Republic of China
. Trading between securities firms has to be carried out through a subsystem of the GreTai Securities Market's Electronic Bond Trading System, for which trading hours are between 9:00 AM and 1:30 PM. However, Formosa bonds also listed on overseas exchanges may be traded over-the-counter
between bond dealers.
The first Formosa bonds were part of a US$
250 million carried out by Deutsche Bank
in November 2006; BNP Paribas
followed with an Australian dollar
issuance, initially planned at A$500 million (US$386 million at then-current exchange rates) for February 2007, but later reduced to A$308 million (US$258 million) and delayed until 10 April 2007. HSBC
were also said to be considering issuing such a bond, and BNP Paribas suggested that they might regularly issue Formosa Bonds. Presently, only Taiwan branches of publicly-traded overseas financial institutions are permitted to issue Formosa Bonds; the market regulator has floated the idea of extending this permission to other branches and subsidiaries of such institutions as well.
New Taiwan dollar
The New Taiwan dollar , or simply Taiwan dollar, is the official currency of the Taiwan Area of the Republic of China since 1949, when it replaced the Old Taiwan dollar...
-denominated bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
issued in Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
by a foreign institution.
History
The major designer and promoter of the Formosa bond was Lee Shyan-yuan, a board member of Taiwan's market regulator, the Financial Supervisory CommissionFinancial Supervisory Commission
The Financial Supervisory Commission is an independent government agency subordinate to the Executive Yuan of the Republic of China. It is responsible for regulating securities markets , banking, and the insurance sector...
. The name refers to Formosa, an alternative name for the island of Taiwan; it was chosen as the result of a contest held in September 2006 by the FSC. 15 names were suggested, intended to reflect special characteristics of Taiwan; two different Chinese-language
Chinese language
The Chinese language is a language or language family consisting of varieties which are mutually intelligible to varying degrees. Originally the indigenous languages spoken by the Han Chinese in China, it forms one of the branches of Sino-Tibetan family of languages...
versions of the name "Formosa bond" were suggested, as well as "C-Wang Bond" and "High-Tech Island Bond". Participants were also invited to suggest their own names for the bonds. The result of the contest was announced on 25 September 2006; "Formosa Bond" was the most popular choice, with 5,776 votes, or 57.16% of the total cast; the second-most popular choice, Taiwan 101
Taipei 101
Taipei 101 , formerly known as the Taipei World Financial Center, is a landmark skyscraper located in Xinyi District, Taipei, Taiwan. The building ranked officially as the world's tallest from 2004 until the opening of the Burj Khalifa in Dubai in 2010...
Bond, had only 1,229 votes, and the third-most popular choice, an alternative Chinese translation of "Formosa Bond", garnered only 618 votes.
Trading
Bonds to be traded must have a credit ratingBond credit rating
In investment, the bond credit rating assesses the credit worthiness of a corporation's or government debt issues. It is analogous to credit ratings for individuals.-Table:...
of BBB or higher; they may not be issued in Chinese renminbi
Renminbi
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
, the official currency of the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
. Trading between securities firms has to be carried out through a subsystem of the GreTai Securities Market's Electronic Bond Trading System, for which trading hours are between 9:00 AM and 1:30 PM. However, Formosa bonds also listed on overseas exchanges may be traded over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
between bond dealers.
The first Formosa bonds were part of a US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
250 million carried out by Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
in November 2006; BNP Paribas
BNP Paribas
BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...
followed with an Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
issuance, initially planned at A$500 million (US$386 million at then-current exchange rates) for February 2007, but later reduced to A$308 million (US$258 million) and delayed until 10 April 2007. HSBC
HSBC
HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...
were also said to be considering issuing such a bond, and BNP Paribas suggested that they might regularly issue Formosa Bonds. Presently, only Taiwan branches of publicly-traded overseas financial institutions are permitted to issue Formosa Bonds; the market regulator has floated the idea of extending this permission to other branches and subsidiaries of such institutions as well.